The Regulated companies continue to be rate-regulated on a cost-of-service basis; therefore, the accounting policies of the Regulated companies conform to GAAP applicable to rate-regulated enterprises and historically reflect the effects of the rate-making process.

Management believes it is probable that the Regulated companies will recover their respective investments in long-lived assets, including regulatory assets. If management determined that it could no longer apply the accounting guidance applicable to rate-regulated enterprises to the Regulated companies' operations, or that management could not conclude it is probable that costs would be recovered or reflected in future rates, the costs would be charged to net income in the period in which the determination is made.

NU	As of December 31,
(Millions of Dollars)	2011		2010
Deferred Benefit Costs	$	1,360.5	$	1,094.2
Regulatory Assets Offsetting Derivative Liabilities		939.6		859.7
Securitized Assets		101.8		171.7
Income Taxes, Net		425.4		401.5
Unrecovered Contractual Obligations		100.9		123.2
Regulatory Tracker Deferrals		45.9		70.3
Storm Cost Deferrals		356.0		60.1
Asset Retirement Obligations		47.5		45.3
Losses on Reacquired Debt		24.5		21.5
Deferred Environmental Remediation Costs		38.5		36.8
Deferred Operation and Maintenance Costs		4.0		29.5
Other Regulatory Assets		78.2		81.5
Total Regulatory Assets	$	3,522.8	$	2,995.3
Less: Current Portion	$	255.1	$	238.7
Total Long-Term Regulatory Assets	$	3,267.7	$	2,756.6

	As of December 31,
	2011						2010
(Millions of Dollars)	CL&P		PSNH		WMECO		CL&P		PSNH		WMECO
Deferred Benefit Costs	$	572.8	$	200.0	$	118.9	$	471.8	$	152.6	$	96.0
Regulatory Assets Offsetting Derivative Liabilities		932.0		-		7.3		846.2		12.8		-
Securitized Assets		-		76.4		25.4		-		129.8		41.9
Income Taxes, Net		339.6		38.0		17.8		328.9		31.4		16.8
Unrecovered Contractual Obligations		80.9		-		20.0		97.9		-		25.3
Regulatory Tracker Deferrals		5.5		11.9		22.1		35.5		14.7		15.2
Storm Cost Deferrals		268.3		44.0		43.7		4.0		40.7		15.4
Asset Retirement Obligations		27.9		13.5		3.2		24.9		14.7		3.0
Losses on Reacquired Debt		13.9		9.0		0.3		11.2		8.4		0.4
Deferred Environmental Remediation Costs		-		9.7		-		-		9.7		-
Deferred Operation and Maintenance Costs		4.0		-		-		29.5		-		-
Other Regulatory Assets		29.1		25.6		10.0		29.0		19.6		13.1
Total Regulatory Assets	$	2,274.0	$	428.1	$	268.7	$	1,878.9	$	434.4	$	227.1
Less: Current Portion	$	170.2	$	34.2	$	35.5	$	157.5	$	39.2	$	19.5
Total Long-Term Regulatory Assets	$	2,103.8	$	393.9	$	233.2	$	1,721.4	$	395.2	$	207.6

Additionally, the Regulated companies had $32.4 million ($5 million for CL&P, $22.4 million for PSNH, and $1.6 million for WMECO) and $37.5 million ($0.6 million for CL&P, $26.5 million for PSNH, and $1.9 million for WMECO) of regulatory costs as of December 31, 2011 and 2010, respectively, which were included in Other Long-Term Assets on the accompanying consolidated balance sheets. These amounts represent incurred costs that have not yet been approved for recovery by the applicable regulatory agency. Management believes these costs are probable of recovery in future cost-of-service regulated rates.

Of the total December 31, 2011 amount, $21.7 million for PSNH related to costs incurred for Tropical Storm Irene and the October snowstorm restorations that met the NHPUC criteria for cost deferral. Refer to the "Storm Cost Deferrals" section below for further discussion.

The December 31, 2010 balance of regulatory costs included in Other Long-Term Assets at PSNH included costs incurred for the February 2010 wind storm restorations that met the NHPUC specified criteria for cost deferral and certain costs related to previously recognized lost tax benefits as a result of a provision in the 2010 Healthcare Act that eliminated the tax deductibility of actuarially equivalent Medicare Part D benefits for retirees. During June 2011, the NHPUC approved these costs for recovery, with a return on the storm costs, and PSNH recorded a regulatory asset of $10.9 million related to the wind storm restoration costs and $7.2 million for the recovery of the lost tax benefits. On July 28, 2010, PURA allowed the creation by CL&P of a regulatory asset for the recovery of lost tax benefits as a result of the 2010 Healthcare Act, subject to review in its next rate case. On January 31, 2011, the DPU allowed the creation by WMECO of a regulatory asset as a result of the 2010 Healthcare Act. NU has concluded that the costs associated with these lost tax benefits are probable of recovery and as of December 31, 2011, $32.2 million ($18.9 million for CL&P, $6.6 million for PSNH, $3.2 million for WMECO and $3.5 million for Yankee Gas) are included in Other Regulatory Assets in the table above. These assets are not earning a return. PSNH and WMECO's costs are being recovered over a period of 5 to 7 years. For further information regarding the 2010 Healthcare Act, see Note 11, "Income Taxes," to the consolidated financial statements.

For rate-making purposes, the Regulated companies recover the cost of allowed equity return on certain regulatory assets. This cost, which is not recorded on the accompanying consolidated balance sheets, totaled $3.5 million and $6.1 million for CL&P and $7.6 million and $0.5 million for PSNH as of December 31, 2011 and 2010, respectively. These costs will be recovered in rates.

Deferred Benefit Costs: NU's Pension, SERP and PBOP Plans are accounted for in accordance with accounting guidance on defined benefit pension and other postretirement plans. Under this accounting guidance, the funded status of pension and other postretirement plans is recorded with an offset to Accumulated Other Comprehensive Income/(Loss) and is remeasured annually. However, because the Regulated companies are rate-regulated on a cost-of-service basis, offsets were recorded as regulatory assets as of December 31, 2011 and 2010 as these amounts have been, and continue to be, recoverable in cost-of-service regulated rates. Regulatory accounting was also applied to the portions of the NUSCO costs that support the Regulated companies, as these amounts are also recoverable. The deferred benefit costs of CL&P and PSNH are not in rate base. WMECO's deferred benefit costs are earning an equity return at the same rate as the assets included in rate base. Pension and PBOP costs are expected to be amortized into expense over the average future employee service period of approximately 10 and 9 years, respectively.

Regulatory Assets Offsetting Derivative Liabilities: The regulatory assets offsetting derivative liabilities relate to the fair value of contracts used to purchase power and other related contracts that will be collected from customers in the future. Included in these amounts are derivative liabilities relating to CL&P's capacity contracts, referred to as CfDs. See Note 4, "Derivative Instruments," to the consolidated financial statements for further information. These assets are excluded from rate base and are being recovered as the actual settlement occurs over the duration of the contracts.

Securitized Assets: In April 2001, PSNH issued RRBs in the amount of $525 million. PSNH used the majority of the proceeds from that issuance to buydown its power contracts with an affiliate, North Atlantic Energy Corporation. In May 2001, WMECO issued $155 million in RRBs and used the majority of the proceeds from that issuance to buyout an IPP contract. These assets are not earning an equity return and are being recovered over the amortization period of their associated RRBs. PSNH RRBs are scheduled to fully amortize by May 1, 2013 and WMECO RRBs are scheduled to fully amortize by June 1, 2013.

Income Taxes, Net: The tax effect of temporary differences (differences between the periods in which transactions affect income in the financial statements and the periods in which they affect the determination of taxable income, including those differences relating to uncertain tax positions) is accounted for in accordance with the rate-making treatment of the applicable regulatory commissions and accounting guidance for income taxes. Differences in income taxes between the accounting guidance and the rate-making treatment of the applicable regulatory commissions are recorded as regulatory assets. These assets are excluded from rate base. For further information regarding income taxes, see Note 11, "Income Taxes," to the consolidated financial statements.

Unrecovered Contractual Obligations: Under the terms of contracts with CYAPC, YAEC and MYAPC, CL&P, PSNH and WMECO are responsible for their proportionate share of the remaining costs of the nuclear facilities, including decommissioning. A portion of these amounts was recorded as unrecovered contractual obligations regulatory assets. These obligations for CL&P are earning a return and are being recovered through the CTA. Amounts for WMECO are being recovered without a return and are anticipated to be recovered by 2013, the scheduled completion date of stranded cost recovery. Amounts for PSNH were fully recovered by 2006.

Regulatory Tracker Deferrals: Regulatory tracker deferrals are approved rate mechanisms that allow utilities to recover costs in specific business segments through reconcilable tracking mechanisms that are reviewed at least annually by the applicable regulatory commission. The reconciliation process produces deferrals for future recovery or refund, which can be either under or over-collections to be included in future customer rates each year. Regulatory tracker deferrals are recorded as regulatory assets if costs are in excess of collections from customers and are recorded as regulatory liabilities if collections from customers are in excess of costs. All material regulatory tracker deferrals that are in a regulatory asset position are earning some form of return. The following regulatory tracker deferrals were recorded as either regulatory assets or liabilities as of December 31, 2011 and 2010:

CL&P Reconciliation Mechanisms: The PURA has established several reconciliation mechanisms, which allow CL&P to recover costs associated with the procurement of energy for SS and LRS, congestion and other costs associated with power market rules approved by the FERC or as approved by the PURA, C&LM programs, the retail transmission of energy, certain regulatory and energy public policy costs, such as hardship protection costs and transition period property taxes, and stranded costs, such as the amortization of regulatory assets and IPP over market costs. As part of the CTA mechanism reconciliation process, CL&P has also established an obligation to refund the variable incentive portion of its transition service procurement fee, which totaled $26.3 million and $24.7 million as of December 31, 2011 and 2010, respectively, and was recorded as a regulatory liability.

PSNH Reconciliation Mechanisms: The NHPUC permits PSNH to recover the costs of providing generation, restructuring costs as a result of deregulation, the retail transmission of energy, and the cost of C&LM programs through various reconciliation mechanisms.

WMECO Reconciliation Mechanisms: The DPU has approved a number of individual cost and revenue requirement recovery mechanisms. These mechanisms recover costs associated with providing energy, retail transmission of energy, administrative costs to procure energy, bad debt costs associated with providing energy, company investments in renewable energy, such as solar, and credits given to customers who generate renewable energy. There is also a mechanism for the recovery of stranded generation costs. Additionally, the DPU has provided cost and revenue requirement recovery mechanisms for certain operating expenses. These individual mechanisms include recovery of pension and PBOP costs, certain state government regulatory review, energy efficiency programs, customer arrearage forgiveness programs and low income customer discounts.

In the January 31, 2011 rate case, WMECO received approval for a revenue decoupling reconciliation mechanism, which provides assurance that WMECO will recover a DPU pre-established level of baseline distribution delivery service revenue to manage all other distribution operating expenses and earn a level of return on its capital investment.

Storm Cost Deferrals: The storm cost deferrals relate to costs incurred at CL&P, PSNH and WMECO for restorations that met regulatory agency specified criteria for cost deferral.

On June 1, 2011, a series of severe thunderstorms with high winds, including tornadoes, struck portions of WMECO's service territory. On June 9, 2011, another series of severe thunderstorms with high winds struck CL&P, PSNH and WMECO's service territories. The cost of restoration that was deferred for future recovery from customers and recorded as a regulatory asset as of December 31, 2011 for CL&P and WMECO totaled $11 million and $3.3 million, respectively.

On August 28, 2011, Tropical Storm Irene caused extensive damage to NU's distribution system. The estimated cost of restoration that was deferred for future recovery from customers and recorded as a regulatory asset as of December 31, 2011 for CL&P and WMECO totaled $105.6 million and $3.2 million, respectively. PSNH recorded $7 million in Other Long-Term Assets as previously described.

On October 29, 2011, an unprecedented storm inundated NU's service territory with heavy snow causing significant damage to NU's distribution and transmission systems. In terms of customer outages, this was the most severe storm in CL&P's history, surpassing Tropical Storm Irene; the third most severe in PSNH's history and the most severe in WMECO's history. The estimated cost of restoration that was deferred for future recovery from customers and recorded as a regulatory asset as of December 31, 2011 for CL&P and WMECO totaled $157.7 million and $23.5 million, respectively. PSNH recorded $14.7 million in Other Long-Term Assets as previously described. The estimated cost of restoration is subject to change as additional cost information becomes available.

Management believes its response to the storm damage was prudent and therefore believes it is probable that CL&P, PSNH and WMECO will be allowed to recover these deferred storm costs. CL&P, PSNH and WMECO will seek recovery of these estimated deferred storm costs through the appropriate regulatory recovery process.

The PSNH deferral as of December 31, 2011 relates to remaining costs incurred for a major storm in December 2008 and the February 2010 wind storm restorations, both of which were approved for recovery and are included in rate base. WMECO's remaining storm deferral relates to 2008 and 2010 storm costs, which were approved for recovery and are earning a return.

Asset Retirement Obligations: The costs associated with the depreciation of the Regulated companies' ARO assets and accretion of the ARO liabilities are recorded as regulatory assets in accordance with regulatory accounting guidance. For CL&P and WMECO, ARO assets, regulatory assets and liabilities offset and are excluded from rate base. PSNH's ARO assets, regulatory assets and liabilities are included in rate base. These costs are being recovered over the life of the underlying property, plant and equipment.

Losses on Reacquired Debt: The regulatory asset relates to the losses associated with the reacquisition or redemption of long-term debt and are amortized over the life of the respective long-term debt issuance. These deferred losses are incorporated as part of debt costs included in the rate of return calculation.

Deferred Environmental Remediation Costs: This regulatory asset relates to environmental remediation costs at PSNH of $9.7 million and Yankee Gas of $28.8 million. Both PSNH and Yankee Gas have regulatory rate recovery mechanisms for environmental costs and accordingly, offsets to environmental reserves were recorded as regulatory assets. Management continues to believe these costs are probable of recovery in future cost-of-service regulated rates.

Deferred Operation and Maintenance Costs: This regulatory asset represents the deferral of maintenance expense in connection with the deferred recovery of revenue requirements for the period July 1, 2010 through December 31, 2010, as allowed by the PURA. CL&P is allowed to recover these costs from January 1, 2011 through June 30, 2012.

Regulatory Liabilities: The components of regulatory liabilities are as follows:

NU	As of December 31,
(Millions of Dollars)	2011		2010
Cost of Removal	$	172.2	$	194.8
Regulatory Liabilities Offsetting Derivative Assets		-		38.1
Regulatory Tracker Deferrals		139.1		95.1
AFUDC Transmission Incentive		67.0		62.1
Pension Liability - Yankee Gas Acquisition		10.0		12.5
Overrecovered Spent Nuclear Fuel Costs and Contractual Obligations		15.4		14.6
Wholesale Transmission Overcollections		9.6		13.7
Other Regulatory Liabilities		20.6		8.2
Total Regulatory Liabilities	$	433.9	$	439.1
Less: Current Portion	$	167.8	$	99.4
Total Long-Term Regulatory Liabilities	$	266.1	$	339.7

		As of December 31,
		2011								2010
(Millions of Dollars)		CL&P		PSNH		WMECO		CL&P			PSNH		WMECO
Cost of Removal		$	63.8	$	53.2	$	7.2	$	78.6		$	57.3	$	9.5
Regulatory Liabilities Offsetting
	Derivative Assets		-		-		-		38.1			-		-
Regulatory Tracker Deferrals			94.4		17.3		21.3		79.4			6.6		4.8
AFUDC Transmission Incentive			57.7		-		9.3		56.5			-		5.6
Overrecovered Spent Nuclear Fuel Costs and
	Contractual Obligations		15.4		-		-		14.6			-		-
Wholesale Transmission Overcollections			4.5		2.6		9.5		13.7			-		-
Other Regulatory Liabilities			11.8		5.8		2.4		1.2			3.1		3.1
Total Regulatory Liabilities		$	247.6	$	78.9	$	49.7	$	282.1		$	67.0	$	23.0
Less: Current Portion		$	108.3	$	24.5	$	33.1	$	75.7		$	8.4	$	8.0
Total Long-Term Regulatory Liabilities		$	139.3	$	54.4	$	16.6	$	206.4		$	58.6	$	15.0

Cost of Removal: NU's Regulated companies currently recover amounts in rates for future costs of removal of plant assets over the lives of the assets. These amounts are classified as Regulatory Liabilities on the accompanying consolidated balance sheets.

Regulatory Liabilities Offsetting Derivative Assets: The regulatory liabilities offsetting derivative assets relate to the fair value of contracts used to purchase power and other related contracts that will benefit customers in the future. See Note 4, "Derivative Instruments," to the consolidated financial statements for further information. This liability is excluded from rate base and is refunded as the actual settlement occurs over the duration of the contracts.

AFUDC Transmission Incentive: AFUDC was recorded on 100 percent of CL&P and WMECO's CWIP for their NEEWS projects through May 31, 2011, all of which was reserved as a regulatory liability to reflect rate base recovery for 100 percent of the CWIP as a result of FERC-approved transmission incentives. Effective June 1, 2011, FERC approved changes to the ISO-NE Tariff in order to include 100 percent of the NEEWS CWIP in regional rate base. As a result, CL&P and WMECO no longer record AFUDC on NEEWS CWIP.

Overrecovered Spent Nuclear Fuel Costs and Contractual Obligations: CL&P and WMECO currently recover amounts in rates for costs of disposal of spent nuclear fuel and high-level radioactive waste for the period prior to the sale of their ownership shares in the Millstone nuclear power stations. Collections in excess of these costs are recorded as regulatory liabilities. CL&P has also established a regulatory liability for the overrecovery of its proportionate share of the remaining costs, including decommissioning, of the MYAPC nuclear facility.

Wholesale Transmission Overcollections: CL&P, PSNH and WMECO's transmission rates recover total transmission revenue requirements, recovering all regional and local revenue requirements for providing transmission service. These rates provide for annual reconciliations to actual costs and the difference between billed and actual costs is deferred. Regulatory liabilities were recorded for collections in excess of costs.

Pension Liability - Yankee Gas Acquisition: When Yankee Gas was acquired by NU, the pension liability was adjusted to fair value with an offset to the adjustment recorded as a regulatory liability, as approved by the PURA. The pension liability was approved for amortization over an approximate 13-year period beginning in 2002.